Why critical illness and disability coverage?

Critical illness and disability insurance are often overlooked, but are equally as important as life insurance.

Most of us understand the importance of life insurance: to look after your loved ones by replacing your lost income earning ability if you were to die prematurely. But what happens to your income earning ability if you become ill or disabled? Critical illness (CI) and disability insurance (DI) are often overlooked, but are equally as important as life insurance. They protect you against the financial hardships while recovering from a critical illness or disability. Considering that statistically you have a greater chance of suffering a critical illness or disability than you do of dying prematurely, let’s look at these two types of coverage.

Why critical illness coverage? A critical illness is a diagnosis of cancer, heart attack, stroke, or up to 27 illnesses that CI insurance plans typically cover. It will pay out a lump sum payment between $10,000 and $2 million, depending on how much coverage you purchase. The CI lump sum payment has no restrictions. It can be used for anything you can think of: mortgage payments, experimental treatments abroad, expensive drugs, extra income, or just for that once-in-a-lifetime vacation. For benefits to be paid out, most policies require that your survive at least 30 days after diagnosis.

The nature of the one-time lump-sum benefit payment can also be a drawback, as once the money is spent, it’s gone. Unfortunately CI usually isn’t enough to keep you financially during a long-term serious illness or injury. For example, if you had a $25,000 policy and you made a claim at age 25, but you had a permanent disability as a result of your illness, once you make a claim, that’s all the money you are going to get from CI. This is where DI fills in the financial gap.

Why disability insurance? You can become disabled from either an injury or illness. DI protects your income up to age 65 and generally kicks in between 30-90 days after a disability occurs. If you choose coverage that begins paying earlier or for a longer period your premiums will be higher.

Be aware of the different definitions that your DI policy can fall under. “Any Occupation” means that you won’t receive benefits if you can work any other job, even as a cashier. “Regular Occupation” means you receive benefits if you can’t work at your regular job.

“Own Occupation” is the gold standard as you receive benefits for your regular occupation even if you work in another occupation. As with anything, the better the coverage the higher the premium. The best coverage is also not always available for occupations that are highly physical as the risk of suffering a disability are greater at a construction site than at a desk.

Disability insurance premiums differs from critical illness in the way that the premiums aren’t just based on your health and your age; they’re also based on your occupation. A 40-year-old landscaper will pay more than a 40-year-old pharmacist because the landscaper has a much higher risk of disability than the pharmacist.

Ideally you should have both CI and DI working in tandem with each other. A CI lump sum helps cover the immediate costs of a serious illness and recovery, while DI helps cover the long term effects of an extended illness or injury.

There’s lots to consider here, so it’s best to sit down with a trusted insurance professional and work out the coverage that’s appropriate and affordable for you.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Town of Stettler sports fields close for improvements

The Turf Revitalization Plan has been expedited from the initial five-year strategy

UPDATE: Heartland Youth Centre has named the winners in this year’s fundraising raffle

Nan Gardner has won the grand prize of the 2020 GMC Terrain

Still no confirmed active COVID-19 cases in Red Deer, central zone

There are 15 new confirmed cases were in Alberta, the province said Thursday

It’s back to business at Stettler’s Superfluity

This year also marks organization’s 40th anniversary

Alberta RCMP remind citizens to create a nightly #9PMRoutine

‘We are using #9PMRoutine because of its popularity across the globe.’

Alberta Opposition calls on government to consult on provincial parks

Alberta Opposition calls on government to consult on provincial parks

Alberta overhauls real estate regulator in wake of prior dysfunctional board

Alberta overhauls real estate regulator in wake of prior dysfunctional board

Alberta registrar reverses rejection, man gets to have FREE AB licence plate

Alberta registrar reverses rejection, man gets to have FREE AB licence plate

Alberta imposing steep penalties but no charges on first-time impaired drivers

Alberta imposing steep penalties but no charges on first-time impaired drivers

No separate lockup for man beaten after arrest with police vehicle: Nunavut RCMP

No separate lockup for man beaten after arrest with police vehicle: Nunavut RCMP

Limit gun capacity to five bullets, victims group urges Trudeau government

Limit gun capacity to five bullets, victims group urges Trudeau government

RCMP say gunman behind mass killing in Nova Scotia was ‘injustice collector’

RCMP say gunman behind mass killing in Nova Scotia was ‘injustice collector’

Women’s group angered by ‘intoxication’ ruling but concern called overblown

Women’s group angered by ‘intoxication’ ruling but concern called overblown

Most Read